Brand Value Can Be More Critical Than Price In Closing The Sale

By William Matthies -- TWICE, 6/21/2010

For consumers, deciding which product to buy is not a simple matter of systematically determining which one will best meet their needs. If it were, the brand landscape would look considerably different.

Instead, most unknowingly employ a complex “voodoo” calculus that includes what they think they need or want (not the same thing), and a variety of related issues including ergonomics, features, performance, price, and brand value.

Of those, brand value is likely the least understood, as well as the most important.

In the past, consumer electronics leader brands like Sony, Panasonic, Pioneer, Kenwood and others too numerous to name, benefited tremendously from having more brand value than those on an even longer list of alternative brands. How would you guess that A-list looks today?

CE seemingly has a death wish mentality about competing on price. Don’t get me wrong; I understand the power of lower prices. But I also know there comes a point when a price is so low that consumers believe it may be an indication of a lesser product, reflecting poorly on the manufacturer as well as the retailer who sells it.

Logically, manufacturers should be responsible for building their own brand value while retailers should merchandise and sell product. I agree, although the cause-and-effect relationship in the never-ending struggle between the two for profit shows an unintended consequence.

Retailers long lobbied for, and in many cases received, the right to discount face of invoice (DFI) with the coop and other marketing-related incentives offered by manufacturers. Great, but unfortunately far too many took that right to their bottom lines, which meant less money spent in support of the brand. And while it could be argued that the manufacturer just needs to find more money elsewhere to support their brand, that wasn’t possible before and certainly isn’t today.

Ladies and gentlemen, the chickens have come home to roost.

We are in an industry that has placed far too much emphasis on price at the expense of all the other important product attributes that go into the purchase decision process, none more so than brand value.

So just exactly how valuable is brand value? Expert consensus suggests that consumers base 20 percent of their purchase decision on brand. Or you could look at brand consultancy Interbrand, which publishes an annual Top 100 global brand value index. Among other things, it estimates the value of each Top 100 brand on the open market. In 2009, No. 100 was Campbell’s, worth an estimated $3.1 billion. No. 1? Coca-Cola, with an estimated value of $68.7 billion.

The next time you think about lowering price to increase sales, think again. Chances are you already sell far below what most consumers expect, and are willing to pay, for brands you need only tell more about to make the sale.

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William Matthies is the CEO of Coyote Insight (www.coyoteinsight.com) and can be reached at wmatthies@coyoteinsight.com or at (714) 726- 2901. Visit Business Wisdom at http://businesswisdom101.blogspot.com